Appirio will give Wipro a better standing in cloud computing

In an effort to rejuvenate its existing technology business, Wipro will acquire the Indianapolis-headquartered Appirio for $500 million. The acquisition is expected to be closed by the end of this year.

Appirio offers cloud computing technology to companies like Salesforce.com, Google Apps, Workday, Concur and Amazon Web Services on a subscription basis.

This acquisition, Wipro’s second-largest this year, will significantly enhance the Bengaluru-headquartered company’s market share and positioning in the Cloud Enterprise Applications space, especially in technologies of Salesforce and Workday, Wipro said in a statement. The announcement comes a day before the company announces its second quarter results.

Further, Wipro will consolidate its existing cloud applications practices of Salesforce and Workday under the Appirio brand and structure. Chris Barbin, Chief Executive Officer of Appirio, will lead the expanded business.

With the acquisition, Wipro gets access to customers like Coca-Cola, eBay, Facebook, Home Depot in modern technology areas.

India’s third-largest exporter does not provide a break-up of revenues accruing from technology areas like cloud computing.

Cloud computing is rewriting the laws of technology usage globally due to flexibility in pricing models and has had a huge impact on the fortunes of companies that stitch systems together. Companies such as Salesforce, Workday and Amazon others have made considerable inroads in an area that was dominated by the likes of Microsoft, SAP and IBM. Analysts were upbeat at the acquisition. “As a cloud consulting firm, Appirio can help Wipro accelerate its entry into the market for cloud services and contribute to reshaping Wipro’s strategy in this area,” said Peter Schumacher, CEO, Value Leadership Group.

In this backdrop, the Abidali Z Neemuchwala-led firm has set an aspirational target to cross $15 billion in revenues, with operating margin of 23 per cent by 2020. This, coupled with focus on areas such as digital operations and cyber security are efforts taken to stay relevant to its customers, an issue dogging the $143 billion IT sector.

However, this transition is proving painful as it requires employees to think differently. “Building expertise takes time and in this regard, the acquisition is timely as it gets more than 1,000 people,” said Urmil Shah, IT analyst at IDBI Capital.

The development comes at a time when the IT exporter is expected to post results on Friday, for which it has 0-1 per cent sequential growth in revenue. In the beginning of this fiscal, Wipro pointed to strong headwinds in the energy and utility verticals.